Hospitals Are Profiting from Patients’ Pain

In a series of articles titled “Paying Till It Hurts,” the New York Times recently reported about the extremely excessive hospital bills people receive after being treated in an emergency room (ER). The Times examined the cost of ER care from coast to coast and determined that hospitals are charging extraordinarily high rates for care, not for medical reasons, but because it benefits the hospitals financially. According to the article, hospitals are the most powerful members of the nation’s health care system and they operate with little or no regulatory oversight in the private market.

The Times provided the following bills as examples of the cost of care in some ERs. At Lenox Hill Hospital in New York City, a man received five stitches on his finger; the hospital charged $3,355 for the ER visit. At Mercy Hospital in Port Huron, Michigan, a student received 6 stitches in the ER; she was charged almost $3000. At California Pacific Medical Center in San Francisco, California, a young woman received three stitches for a laceration on her knee, at a cost of $2,229. The hospital charged $1,696 to a second patient, a young toddler whose forehead gash was sealed with a dab of skin glue.

According to an article written by Steven Brill, “Bitter Pill: Why Medical Bills are Killing Us,” published in Time magazine, “exorbitant medical bills are the result of what happens when powerless buyers meet sellers in what is the ultimate seller’s market.” Brill writes that this is a “… uniquely American gold rush for those who provide everything from wonder drugs to canes to high tech implants to CT scans to hospital bill-coding and collection services… The American health care market has transformed tax-exempt “nonprofit” hospitals into the towns’ most profitable businesses and largest employers…”

Brill cited studies done by the McKinsey and Company consulting firm which determined the United States spends more on health care than the next 10 biggest spenders combined: Japan, Germany, France, China, the United Kingdom, Canada, Brazil, Spain and Australia. Brill concluded that, “of the total $2.8 trillion that will be spent on health care, about $800 billion will be paid by the federal government through the Medicare insurance program for the disabled and those 65 and older and the Medicaid program, which provides care for the poor. That $800 billion, which keeps rising far faster than inflation and the gross domestic product, is what’s driving the federal deficit. The other $2 trillion will be paid mostly by private health-insurance companies and individuals who have no insurance or who will pay some portion of the bills covered by their insurance…“

So what can consumers do to keep healthcare expenses down? Not much, actually, but in an attempt to keep consumers and others informed of what different hospitals charge for procedures, CMS posted Medicare Provider Charge Data for the 100 most common inpatient services and 30 most common outpatient services. CMS notes that hospitals determine what they want to charge for items and services and this amount will then be billed to patients. A look at the data shows inpatient charges vary widely. For example, average inpatient charges for services a hospital may provide in connection with a joint replacement (MS-DRG 470) range from $5,300 at a hospital in Ada, Oklahoma; to $223,000 at a hospital in Monterey Park, California. Even within the same geographical area, hospital charges can vary significantly. For example, average inpatient hospital charges for services that may be provided to treat heart failure (MS-DRG 292) in the Denver, Colorado, area range from $21,000 to $46,000. At the end of the day, “caveat emptor” applies to hospitals.